Teaching Children the Value of Money

Personal Finance July 21, 2010 Print Friendly and PDF

Ever wondered why your children want so much more than you did as a child?

Parents are battling a whole new set of circumstances than our parents did with us, and this is bigger than simple cases of the “I wants.” Advertisers play a substantial role in the lives of children. Due to well financed and elaborate ad campaigns, children recognize brands in toddlerhood and they request brand names already in their preschool years.

The good news is that amidst the glam and hype, there are ways that parents can steel themselves against toys of the year, fads of the decade and latest electronic devices. In fact, with a little preparation, parents may find themselves and their children actually enjoying some teachable moments about needs versus wants and the value of money. The only way to do this is to open the communication with your kids and talk about money as early and as often as possible. Start talking with preschoolers about advertising and don’t stop until they are out of the house.

A great concept to share is that just because something is on “sale” does not necessarily mean that it is the best quality, the best price, or a good choice. Use holiday mega-advertising campaigns to point out that all the new toys are not any better than many others, but companies recognize that families are in stores buying gifts at this time of year, so they are trying to make us THINK they are better. When the inevitable "I neeeeeeeed that" comes into play, really work on whether that is a need or a want. Point out that advertising makes us feel like we need things when we really do not, but the feeling can be very strong.

Open money-centered conversations with your kids without putting them on the defensive. Your teachable moments should be as positive and interactive as possible so that your child can be truly interested in the process of making a smart buying decision. When she tells you she wants something, respond with questions like, “Really, tell me about it? What does it do? How does it work? Do any of your friends have it? Do they like it? Do they use it? Do you know where to buy it? Who has the best price?” If she can answer all of the questions and still wants the item, then she has likely made a responsible, educated decision that this item is worth it to her.

Experience is a wonderful teacher. Wherever you can, give your child opportunities to earn and spend their own money. Practicing smart spending makes smarter spenders. It is that simple. Try giving control over a portion ($10 - $20) of back to school funds for notebooks and supplies and asking them to find good quality items within that budget. Or let them experiment with $5 per grocery store trip for snack items.

Let children know whether you feel a purchase is appropriate or not and then, as often as possible, let them make a final decision. Never allow something that is harmful, dangerous, or inappropriate, but do allow her to make choices. If the less expensive, lower quality item breaks after the first use - lesson learned on looking at quality as well as cost. If all the money is spent on one item and at the next store there is none left over for the other "must have" - lesson learned on budgeting. Try framing each decision in a way that clearly asks your child to consider whether the item they want is worth trading their money for. The notion of trading our money for something else can sometimes give way to second thoughts. Mistakes will be made, but making a mistake now will cost a few dollars. The process teaches something important and can help avoid much larger mistakes that could cost thousands when your young one goes out into the world.

Remember that it is frequently said that children do not know the value of money. This is only partially true. Children don’t know the value of your money. Give them a chance to practice with it and learn from their activities. They will grow to know the value of THEIRS.


This article is adapted from one written by Megan O’Neil-Haight, The University of Maryland Extension, and originally published in Delmarva Youth Magazine, November/December 2005.

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This work is supported by the USDA National Institute of Food and Agriculture, New Technologies for Ag Extension project.